Impact of U.S. Synthetic Fuel Corporation's Proposed Financial Assistance to the Great Plains Coal Gasification Project

Testimony was given on the impact of the U.S. Synthetic Fuel Corporation's (SFC) proposed financial assistance to the Great Plains Coal Gasification Project. The testimony focused on the financial assistance already awarded, the proposed terms of price guarantee assistance, an analysis of possible additional assistance, and the government's options in the event of project abandonment. Since 1982, the Great Plains Gasification Associates has borrowed about $1.46 billion under a loan guarantee agreement with the Department of Energy (DOE). When the loan guarantee agreement was signed, the project had a favorable financial outlook; however, since that date, the financial projections have deteriorated in the wake of declining energy prices. Therefore, Great Plains applied to SFC for additional assistance. In April 1984, SFC tentatively agreed to provide Great Plains up to $790 million in price guarantee assistance and, in April 1985, a loan guarantee under which Great Plains could receive up to $820 million was proposed. DOE analysis showed that with or without assistance there would be a cumulative after-tax negative cash flow and book income and that with assistance total principal and interest payments would be less. In the event of project abandonment, the government could sell the plant or operate it under a contract with a private corporation. Assuming no assistance, the cost to the government of selling the facility would be from $680 to $757 million. The cost of abandonment with SFC assistance could range from $860 million to $1.5 billion depending on the energy prices used in projections and the time the abandonment occurred.